What is the difference between credit, debit and charge card?
They look the identical, they are used in the same way when buying, they are both convenient –but there are some key variances between credit and debit cards? Let’s check them out
A credit card is borrowed money. Once you are issued a credit card, you’re offered a certain credit limit – the highest amount you can borrow from the card issuing company. Whenever you make use of the card, you borrow some amount of money from that issuing company, and every month, you’re expected to repay a part of the money. Mastercard, Visa, and Discover are the leading types of credit cards.
The greatest benefit of credit cards is the convenience. It makes it possible to procure goods and services without really having the cash readily available. There is also an unlimited period of time to repay the money, although you will have to make a minimum payment monthly on the credit card debt. Several credit cards have rewards programs, which return 2-3% of your purchase price.
The major drawback is that, the friendly set up of credit cards along with the lack of pressure to pay back the debt makes it super easy to make poor purchasing choices. Then, once you can’t repay the debt in good time, you usually pay a huge interest on that unpaid debt – and over a long period of time, that interest would become extremely high priced.
A debit card, however, is linked with your checking or savings account. Whenever you make use of the card funds are immediately taken from your checking or savings account to take care of the purchase. Also a number of debit cards have the same purchasing flexibility as credit cards.
You can’t end up in debt with a debit card. It does not let you buy stuffs that you don’t have the available funds for. For anyone having trouble with debt, this really is a great advantage as it keeps you out of trouble. Additionally, they’re flexible and convenient for everyday purchases. You also don’t need to have a good credit score to get a debit card – you usually get one with your checking account.
The number one disadvantage is the fact that you must always keep a very close eye on your balances as you can overdraft your account if you’re not cautious. One more disadvantage is that not many debit cards have rewards programs. Debit cards usually don’t have the same customer protections that credit cards and charge cards have.
Charge cards in many cases are confused with credit cards, but they basically work in a relatively different way. Majority of the charge cards have no credit limit like credit card. Similar to credit cards, charge cards prolong credit to you from the issuer, but you’re expected to pay off the complete balance by the end of the month. Several charge cards in addition have a yearly membership fee.
You don’t need to have the money available for a purchase with a charge card, nor do you run the risk of having a balance that will charge you interest. A lot of charge cards have huge bonus programs that go from 5% money back to free flights on airlines – their reward programs are usually superior to bonus programs for credit cards.
Many charge cards have a yearly fee which eats away by making use of it. Furthermore, since you are operating on credit, you will find that you risk possibly building up a huge balance on the card that will be difficult to pay off.